Efficiency in Arabian Banking

Al-Jarrah, Idries Mohammad Wanas; Molyneux, Philip

doi:10.3366/edinburgh/9780748621002.003.0007

Cited by 42 publications

(33 citation statements)

References 25 publications

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“…The evidence from previous empirical studies of Islamic and conventional banking is mixed: some find no significant difference in efficiency between the two types of banking (Abdul-Majid et al 2005b;El-Gamal and Inanoglu 2005;Mokhtar et al 2006;Bader 2008;Hassan et al 2009;Shahid et al 2010); some studies do not test whether observed differences in efficiency are significant and this is mainly due to small sample size (Hussein 2004;Al-Jarrah and Molyneux 2005;Said 2012). One study (Al-Muharrami 2008) claims that Islamic banks are significantly more efficient 8 An alternative approach using data mining can be found elsewhere (Emrouznejad and Anouze 2009;.…”

Section: Literature Reviewmentioning

confidence: 90%

A comparison of performance of Islamic and conventional banks 2004–2009

Johnes¹,

Izzeldin²,

Pappas³

2014

Journal of Economic Behavior & Organization

255

181

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We compare, using data envelopment analysis (DEA) and meta-frontier analysis (MFA), the performance of Islamic and conventional banks during the period [2004][2005][2006][2007][2008][2009]. The use of nonparametric MFA is new to the Islamic banking context. Our DEA finds no significant difference in mean efficiency between conventional and Islamic banks when efficiency is measured relative to a common frontier. The MFA however, reveals some fundamental differences between the two bank types. In particular, the modus operandi in Islamic banking appears to be less efficient on average than the conventional one. Managers of Islamic banks, however, make up for this as mean efficiency in Islamic banks is higher than in conventional banks when efficiency is measured relative to their own bank type frontier. A second-stage analysis shows that differences between the two banking systems remain even after banking environment and bank-level characteristics have been taken into account. These findings are relevant to both policy-makers and regulators. In particular, Islamic banks should explore the benefits of moving to a more standardized system of banking, while the underperformance of conventional bank managers could be examined in the context of the on-going remuneration culture.

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Section: Literature Reviewmentioning

confidence: 90%

A comparison of performance of Islamic and conventional banks 2004–2009

Johnes¹,

Izzeldin²,

Pappas³

2014

Journal of Economic Behavior & Organization

255

181

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“…Moreover, Saudi Arabia did not have a national currency until 1952, a year that witnessed the establishment of the SAMA (Al-Jarrah, 2002). However, over the years 1950 and 1956, SAMA introduced a paper money in the form of pilgrim receipts, which was covered by foreign currencies and precious metals.…”

Section: Banking Sector Development In Saudi Arabiamentioning

confidence: 99%

“…These banks contributed to the restructuring of the Saudi banking sector. Meanwhile, SAMA encouraged banks to strengthen their capital positions so as to improve the soundness of the system (Al-Sahlawi, 1997;Al-Jarrah, 2002).…”

Section: Competition and Market Structurementioning

confidence: 99%

The competition and market structure in the Saudi Arabia banking

Al‐Muharrami

2009

Journal of Economic Studies

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Purpose -The purpose of this paper is twofold: to investigate the market structure of Saudi Arabia banking industry; and to evaluate the monopoly power of banks during the years 1993-2006. Design/methodology/approach -The paper is examining the market structure using the most frequently applied measures of concentration k-bank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI) and it is evaluating the monopoly power of banks using the "H-statistic" by Panzar and Rosse. Findings -The results show that Saudi Arabia has a moderately concentrated market and is moving to a less concentrated position. Both the concentration indices indicate that the country is moving toward a better position in terms of the market concentration. The Panzar and Rosse "H-statistic" suggests that banks in Saudi Arabia operate under monopolistic competition. Research limitations/implications -These findings may be a temporary effect, evident during the sampled period only. To draw firmer conclusions a longer sample period is needed. Originality/value -Studies of banking market structure in the developed economies' banking are commonplace, however, very few studies are conducted for Saudi Arabia's banking industry.

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“…However, there is little evidence of the use of DEA in the GCC banking sector. Recently, Grigorian and Manole (2005) employed DEA to evaluate commercial banks in Bahrain, Kuwait, Qatar and the United Arab Emirates (UAE) over the period 1997–2003, Al Shammari (2003) employed stochastic frontier analysis (SFA) to estimate the efficiency of GCC commercial banks over the period 1995–2000, Al Jarrah and Molyneux (2003) used the SFA method to study the performance of Islamic banks in Bahrain, Egypt, Jordan and Saudi Arabia over the period 1992–2000, and Limam (1998) used correct ordinary least squares and DEA to analyse the technical efficiency of 52 GCC commercial banks. More recently, Ramanathan (2007) assessed the performance of banks in countries of the Gulf Cooperation.…”

Section: Empirical Analysismentioning

confidence: 99%

Data envelopment analysis with classification and regression tree – a case of banking efficiency

Emrouznejad¹,

Anouze²

2010

Expert Systems

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Data envelopment analysis (DEA) is a non-parametric method for measuring the efficiency and productivity of decision-making units (DMUs). On the other hand data mining techniques allow DMUs to explore and discover meaningful, previously hidden information from large databases. Classification and regression (C&R) is the commonly used decision tree in data mining. DEA determines the efficiency scores but cannot give details of factors related to inefficiency, especially if these factors are in the form of non-numeric variables such as operational style in the banking sector. This paper proposes a framework to combine DEA with C&R for assessing the efficiency and productivity of DMUs. The result of the combined model is a set of rules that can be used by policy makers to discover reasons behind efficient and inefficient DMUs. As a case study, we use the proposed methodology to investigate factors associated with the efficiency of the banking sector in the Gulf Cooperation Council countries.

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Efficiency in Arabian Banking

Cited by 42 publications

References 25 publications

A comparison of performance of Islamic and conventional banks 2004–2009

A comparison of performance of Islamic and conventional banks 2004–2009

The competition and market structure in the Saudi Arabia banking

Data envelopment analysis with classification and regression tree – a case of banking efficiency

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